Delhi District Court
M/S The Innovators vs M/S Bafna Helathcare Pvt Ltd on 1 November, 2023
1
In the Court of Dig Vinay Singh, District Judge (Commercial Court)-03 West,
Tis Hazari Extension Building, Delhi
In re:
CS (Comm.) 436/2021
CNR No. DLWT01-006990-2021
M/s The Innovators
House No. 5/27,
2nd Floor, Block-5
Kirti Nagar Industrial Area,
New Delhi - 110015
Vs.
1. M/s Bafna Healthcare Pvt. Ltd.
2. Mr. Sunil Sumathilal Mutha
Director
M/s Bafna Healthcare Pvt. Ltd.
Both at :- 14/5, Main Mathura Road,
Opposite SRS Tower,
Near Mewla Maharajpur Metro Station,
Faridabad - 121010
Both Also at :-
Unit No. 712, 7th Floor,
World Trade Centre No.1,
Cuffe Parade, Colaba,
Mumbai 400005
Also at :-
Flat No. 701, Mit Zen 12,
Uday Baug, Pune - 411013
Date of institution : 28.09.2021
Date of arguments : 20.10.2023
Date of judgment : 01.11.2023
JUDGMENT
1. This is a suit for recovery of ₹5,08,000/- (Five Lakh Eight Thousand). The suit has been preferred against the above named two defendants. D2 is director of Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 1/13 2D1 company. A director of a company cannot be made liable for third party contractual obligations of a company in the course of the business of the company. A company is a separate juristic entity which can be sued in its name and which can also sue independently in its name. It is settled law that director of a company though owes a fiduciary duty to the company, but the directors do not owe any contractual duty / liability qua third parties in business dealings with the company. A director of company does not have any personal liability unless there is any specific indemnity / guarantee of the director pleaded and proved by plaintiff. One place reliance upon the cases of Tristar Consultants v. Vcustomer Services India Pvt. Ltd., 2007 SCC OnLine Del 359 and; Gurmeet Satwant Singh and Others Versus Meera Gupta and Another 2019 SCC OnLine Del 9505. Therefore, the present judgment is directed against D1 only and D2 is deleted from the array of defendants.
2. The case of the plaintiff, in brief is that the plaintiff is in advertising and branding business of printing, processing and installing of branding and advertising material as per different applications and as per the requirements of its clients. The defendant company placed orders upon the plaintiff vide purchase order dated 19.03.2019, for branding of 40 ambulances with Coloured Retro Vinyls and Coloured Reflective Vinyls, which were to be processed by the plaintiff in the desired design and then pasted on the ambulances to be provided by the D1. After the purchase order was placed upon the plaintiff by the defendant, the plaintiff further approached its vendors for supply of raw material and products in order to create the desired product for the defendant and the plaintiff procured raw materials etc. from third party vendors under various invoices. In the plaint, the plaintiff claims that the plaintiff commenced the work in a timely and efficient manner and the plaintiff raised invoices as Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 2/13 3and when particular scope of work was completed and then the plaintiff used to get the invoices verified by the defendants prior to formally issuing them. The plaintiff provided satisfactory and efficient services to the defendant and completed the work as assigned. In the plaint, the plaintiff nowhere mentioned as to how many ambulances of the defendant, the plaintiff was to work on and how many ambulances were provided and how many ambulances remained to be provided. However, the documents filed by the plaintiff reveal that six invoices have been raised by the plaintiff upon the defendant, which reflects that the plaintiff worked on 22 ambulances. The purchase order dated 19.03.2019 relied by the plaintiff reflects that the work order was for total 40 ambulances. Under the said work order, the plaintiff was to do the work of ambulance branding @ ₹15,000/- (Fifteen Thousand) per ambulance, totaling ₹6 Lakhs on which GST worth ₹1,08,000/- (One Lakh Eight Thousand) was also to be charged, totaling ₹7,08,000/- (Seven Lakh Eight Thousand). As per the case of plaintiff, out of the 40 ambulances to be made available by the defendant to the plaintiff for the said work, only 22 ambulances were provided on which the plaintiff claims to have performed the work to the satisfaction of the defendant. The plaintiff raised invoices upon the defendant qua the work done, but the defendant failed to pay for the same. As per plaintiff, the defendant is liable to pay total outstanding amount of ₹7,08,000/-, i.e. the total amount agreed upon by the parties under the purchase order for branding of all 40 ambulances. After persistent demands of the plaintiff, the defendant did issue a cheque of ₹2 Lakh, but it got dishonoured for which the plaintiff has separately filed a complaint U/s 138 of N. I. Act, which is pending. The plaintiff has restricted its claim in the present suit to ₹5,08,000/- by not including the cheque amount. Plaintiff claims that despite issuance of legal notice dated 20.01.2020 Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 3/13 4the defendant failed to pay any amount to the plaintiff. The reason for claiming entire amount of ₹7,08,000/- is that the plaintiff had acquired raw material for the work in question and the work on the remaining ambulances could not be performed because those ambulances were not made available by the defendant. The plaintiff claims that the plaintiff had raised invoices for ₹3,89,400/- (Three Lakh Eighty-Nine Thousand Four Hundred) qua the work performed on 22 ambulances, but the plaintiff is entitled to entire contractual amount of ₹7,08,000/- as the plaintiff was always ready and willing to undertake the assignment, but it was the defendant who failed to provide the ambulances. Accordingly, a decree of ₹5,08,000/- with pre-suit, pendente lite and future interest @ 18% is claimed by the plaintiff.
3. The defendant contested the suit claiming that the suit has been filed without proper authorisation as there is no document in favour of Mr. Anil Talwar who instituted the suit; this Court lacks territorial jurisdiction as the cause of action arose in Faridabad, Haryana and the defendant is based in Maharashtra and no part of cause of action arose within the jurisdiction of this Court; it was the plaintiff who approached the defendant for supply of Coloured Vinyls and since the work performed by the plaintiff upon the ambulances was not of good quality, therefore the remaining ambulances were not made available; the plaintiff did not resolve the complaints of the defendant; it is claimed that none of the invoices relied by the plaintiff were verified or admitted by the defendants and most of the invoices annexed with the suit have been signed by the plaintiff as 'paid'; the others are merely signed as 'received' or they are having remarks like 'needs improvement' or 'quality not well', which does not amount to verification of the invoice by the defendant; the plaintiff has not attached any invoice to prove that the material procured by the plaintiff was for the Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 4/13 5defendant's work; the plaintiff has not provided any calculation qua the outstanding amount of ₹7,08,000/-; the defendant did not receive any legal notice from the plaintiff and; the plaintiff is not entitled to claim even ₹ 3,89,400/-. The defendant however did not deny the purchase order dated 19.03.2019. The defendant also claimed that the e-mails relied by the plaintiff qua the communications between the parties are not admissible as there is no certificate U/s 65B of the Evidence Act.
4. From the pleadings of parties, following two issues were framed on 30.09.2022.
In addition, on 29.11.2022, one additional issue as follows was also framed.
ISSUES
1. Whether plaintiff is entitled to recovery of ₹5,08,000/- from defendant? (OPP)
2. Whether plaintiff is entitled to interest, if so, at what rate? (OPP)
3. Relief ADDITIONAL ISSUE
1. Whether the suit of the plaintiff is signed and verified by a duly authorized person? OPD
5. In support of its case, plaintiff examined PW1 Mr. Anil Talwar, who tendered his evidence by way of affidavit Ext. PW1/A and he relied upon the purchase order Ext. PW1/1; the eight invoices raised upon the plaintiff by third party vendors qua the raw material supplied to the plaintiff collectively as Ext. PW1/2; the six invoices raised by the plaintiff upon the defendant qua the work performed by the plaintiff on 22 ambulances collectively as Ext. PW1/3; e-mail correspondences between the parties as Ext. PW1/4 along with certificate U/s 65B of the Evidence Act as Ext. PW1/7; legal notice Ext. PW1/5 and a non- starter report as to pre-litigation mediation as Ext. PW1/6.
6. On the other hand, the defendant examined DW1 Suwarn S Mutha as the only witness from the side of defendant. He too tendered his evidence by way of Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 5/13 6affidavit Ext. DW1/A. In his examination in chief, this witness did not rely upon any document. However, in the cross examination by the plaintiff, DW1 exhibited true copy of Minutes of the Meeting passed in the Board of Directors Meeting dated 19.03.2022 as Ext. DW1/P1.
7. I have heard Ld. Counsel for the plaintiff. The defendant stopped appearing in the matter after the cross examination of DW1 and closure of defendant's evidence on 25.05.2023. Nobody for defendant appeared to advance arguments.
8. The issue wise findings are as follows :-
9. ADDITIONAL ISSUE "1. Whether the suit of the plaintiff is signed and verified by a duly authorized person? OPD"
9.1 The additional issue framed on 29.11.2022 seems to have mistakenly placed onus to prove the issue on the defendant, whereas it reads, whether the suit of the plaintiff is signed and verified by a duly authorised person? In such circumstances, the onus should have been placed upon the plaintiff, as the question itself suggests.
9.2 It is the case of the plaintiff that the plaintiff is a proprietorship firm and Mr. Anil Talwar (PW1) is its Proprietor. Since the plaintiff is a proprietorship concern, the plaint has been instituted by the proprietor and the proprietor had signed the plaint and he has appeared as the witness for the plaintiff. It is also so deposed in the affidavit in evidence of the plaintiff Ext. PW1/A. As against it, the defendant did not lead any evidence to show as to how Mr. Anil Talwar was not competent to institute the suit. Nothing in this regard has come in the cross examination of PW1 by the defendant.
9.3 Though, in law a proprietorship concern is not a juristic entity and it can neither sue nor be sued in its name and it has to sue or be sued in the name of proprietor Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.Dated 01.11.2023 Page 6/13 7
only, but nevertheless in the present case it does not make any difference as not only in the title of the plaint, but also in the body of plaint, it is specifically mentioned that the plaint is instituted by the proprietor. 9.4 This issue is accordingly decided in favour of the plaintiff and against the defendant company.
10. Issue no.1 "1. Whether plaintiff is entitled to recovery of ₹5,08,000/- from defendant? (OPP)"
10.1 Onus to prove this issue was on the plaintiff. In its evidence, the plaintiff has reiterated the averments of the plaint. The plaintiff has exhibited the six invoices raised upon the defendant for a total amount of ₹3,89,400/- qua the work performed by the plaintiff on 22 out of 40 ambulances provided by the defendant.
10.2 The purchase order placed by the defendant upon the plaintiff for branding of the ambulances is exhibited as Ext. PW1/1. This purchase order reveals that for every ambulance, the rate agreed between the parties was ₹15,000/- per ambulance totaling ₹6 Lakhs for 40 ambulances on which GST of ₹1,08,000/- was to be charged. This purchase order is not in dispute. The defendant filed an affidavit of admission/denial of the documents on 29.11.2022 and in the said affidavit, the defendant mentioned this purchase order dated 19.03.2019 to be a denied document stating that the said purchase order does not contain any stamp/signature of the defendant company. However, perusal of the WS of the defendant would reveal that in reply to corresponding para no. 4 of the plaint, wherein the plaintiff mentioned about his purchase order dated 19.03.2019, the defendant did not categorically deny about existence of this purchase order or Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 7/13 8about placing of this purchase order upon the plaintiff. A holistic reading of the WS clearly establishes that the defendant did not deny this purchase order and their stand was only that the work performed by the plaintiff on the ambulances provided to the plaintiff was not upto the standard and therefore they had raised quality issues with the plaintiff. The defendant did not raise any objection as to exhibiting this document and did not challenge its authenticity even in the cross examination of PW1. Nothing substantial about this purchase order was even raised in the evidence of the defendant. Thus, it is clear that there was a contract between the plaintiff and the defendant under Ext. PW1/1.
10.3 Under this contract, the plaintiff raised six invoices upon the defendant, collectively Ext. PW1/3. Qua these six invoices, in the affidavit of admission/denial filed by the defendant on 29.11.2022, the defendant conspicuously remained absolutely silent. The defendant did not deny any of these six invoices in its affidavit of admission/denial of the documents submitted on 29.11.2022. It may be mentioned here that prior to this affidavit of admission/denial, there is one more affidavit of admission/denial filed by the defendant on 25.05.2022, which was not in accordance with the Rules framed by Hon'ble Delhi High Court concerning filing of affidavits for admission/denial of the documents under the Commercial Courts Act. In this affidavit, the defendant did deny the six invoices. However, in the subsequent affidavit dated 29.11.2022 filed by the defendant, he remained absolutely silent about the six invoices.
10.4 All the six invoices contain receiving of someone from the side of defendant as to receiving of the bill. These bills range between the period 26.03.2019 to 09.07.2019. Out of them, three invoices dated 26.03.2019, 03.04.2019 & 09.04.2019 also contain the stamp of the defendant company. On these invoices, Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 8/13 9there are certain endorsements made from the side of defendant as to the quality of work done by the plaintiff. On invoice dated 26.03.2019, it is endorsed "finishing poor". On invoice dated 26.03.2019, it is endorsed "needs improvement in finishing". On invoice dated 26.03.2019, it is endorsed "only bill received". On invoice dated 03.04.2019, it is endorsed "branding checked quality not well (so many joints)". On invoice dated 09.04.2019, it is endorsed "only bill received". On invoice dated 09.07.2019, it is endorsed "subject to verification invoice received with challan)".
10.5 Thus, out of the six invoices on three invoices from the side of defendant issues regarding quality of work done was noted on the invoices itself. These invoices are relied upon by none other than the plaintiff. The total of these six invoices come to ₹3,89,400/- only and admittedly the plaintiff was issued a cheque of ₹2 Lakh by the defendant which bounced and regarding which criminal complaint U/s 138 N. I. Act is pending. The plaintiff has not included that amount of dishonoured cheque in the present suit. Thus, technically speaking out of the six invoices of amount of ₹3,89,400/-, deducting ₹2 Lakhs, the balance comes ₹1,89,400/- only.
10.6 Though the defendant tried to wriggle out of these six invoices, however, as mentioned above, the defendant did not deny these invoices in their affidavit of admission/denial filed on 29.11.2022 and also when the case of the defendants itself is that quality issues were raised on some of the invoices, the defendants cannot deny these six invoices. If these six invoices were not issued by the plaintiff to the defendants, the defendants did not come up with any other invoice issued to them by the plaintiff. The defendants did not prove anything on record to show that they had paid any amount whatsoever out of these six invoices to the plaintiff by any mode. Neither any documentary proof of any Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 9/13 10payment made to the plaintiff, nor anything in the cross examination of PW1 or in the examination in chief of DW1 has come on record to show that any amount was paid to the plaintiff out of ₹3,89,400/-.
10.7 Though, the defendants did make endorsement on three invoices as to quality related issues, and as mentioned above, but the defendant never came forward to prove as to what should have been the legitimate amount which the defendant would have been entitled to deduct towards the shortcomings from the said bill amount. Merely by endorsing some quality related issues in the nature of 'poor finishing' or 'needs improvement in future' or 'quality not well because of many joints', a defendant cannot be allowed to withhold the payments. After all, the defendants never rejected the work done by the plaintiff and never returned the ambulances to the plaintiff for rectification of the defects. No communication whatsoever from the side of defendant to the plaintiff has been proved that the defendant was not liable to pay amount qua these invoices or the defendant was liable to deduct any amount qua these invoices. 10.8 Thus, so far as the above mentioned six invoices are concerned, the plaintiff is entitled to recover the invoice amount totaling ₹3,89,400/-. However, out of the said amount the plaintiff has already relinquished recovery of ₹2 Lakh on account of the dishonuored cheque and therefore so far as the said six invoices are concerned, the plaintiff is entitled to recover only ₹1,89,400/-. 10.9 Turning to the claim of the plaintiff, that the plaintiff is entitled to recover entire amount of ₹7,08,000/- as the price agreed for all 40 ambulances despite the fact that the defendant failed to make available 18 ambulances, plaintiff claims that plaintiff had procured raw material for the said work and in this regard collectively eight invoices raised by third parties upon the plaintiff Ext. PW1/2 have been proved. The total of these 8 invoices comes to ₹2,58,957/- (Two Lakh Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 10/13 11Fifty-Eight Thousand Nine Hundred Fifty-Seven). Thereby meaning that the total raw material procured by the plaintiff for all the 40 ambulances was for that much amount. In his cross examination, PW1 admitted that the said bills were towards the raw material for all 40 ambulances i.e. for completing the purchase order Ext. PW1/1. But then, out of those raw materials the plaintiff did consume the raw material for 22 ambulances. Accordingly, even if the plaintiff is liable to charge the defendant for the raw material of those remaining 18 ambulances also, at the most the plaintiff would be entitled to charge the defendant for ₹1,16,530/- (One Lakh Sixteen Thousand Five Hundred Thirty) only, i.e. by dividing the raw material amount with the number of ambulances proportionately, and then calculating the amount for the remaining 18 ambulances. It is so because the raw material qua the 22 ambulances on which the work had been performed was already consumed and the bills raised under Ex PW1/3, and the plaintiff cannot be allowed to charge the defendant twice for the same goods.
10.10 The claim of the plaintiff that without even performing the work on the remaining 18 invoices, the plaintiff is entitled to charge the defendant for ₹7,08,000/- cannot be accepted. From the invoices relied upon by the plaintiff himself, the defendant did point out some quality issues on the work performed on 22 ambulances. In such circumstances, if the defendant did not make available remaining ambulances to the plaintiff because of quality issues in the work earlier performed, the defendant cannot be faulted with. It may be mentioned here that this is not a suit for specific performance of a contract and it is merely a suit for recovery. Therefore, the claim of the plaintiff that the plaintiff is entitled to entire amount of ₹7,08,000/- cannot be accepted.
Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 11/13 1210.11 In view of the above discussion, the plaintiff is entitled to recovery of ₹1,89,400/- (besides the cheque amount of ₹2 Lakh) plus ₹1,16,530/-, totaling ₹3,05,930/- only towards the invoice amount Ext. PW1/3 and the proportionate cost of the raw material for the remaining 18 ambulances out of the total cost price of the raw material as mentioned in invoices Ext. PW1/2. 10.12 This issue is accordingly decided in favour of the plaintiff and against the defendant company.
11. Issue no. 2 "2. Whether plaintiff is entitled to interest, if so, at what rate? (OPP)"
11.1 Onus to prove this issue was also on the plaintiff. Plaintiff claims interest @ 18% per annum. In the invoices Ext. PW1/3 there was no agreement between the parties as to any particular rate of interest to be charged upon failure of the defendant to pay the amount within stipulated period. However, the dealing between the parties was a commercial transaction. 11.2 In the case of Cimmco Limited Versus Pramod Krishna Agrawal 2019 SCC OnLine Del 7289, it is held as follows;
"3. .........Hon'ble Supreme Court has now mandated that lower rates of interest be granted and therefore the pre-suit and also the pendente lite and future interest is liable to be reduced by this Court. Reliance is placed upon the judgments in the cases of Rajendra Construction Co. v. Maharashtra Housing & Area Development Authority, (2005) 6 SCC 678, McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, Rajasthan State Road Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700, Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra, (2007) 2 SCC 720 & State of Rajasthan v. Ferro Concrete Construction Pvt. Ltd. (2009) 3 Arb. LR 140 (SC)." 11.3 In view of the judgment as cited above, interest of justice would be met if the plaintiff is awarded Simple interest @ 8% per annum from the date of last Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.
Dated 01.11.2023 Page 12/13 13invoice i.e. 09.07.2019 till filing of the suit on the suit amount of ₹3,05,930/-. However, qua the pre-suit interest prayed by the plaintiff and granted by this judgment, the plaintiff shall deposit Court Fee.
11.4 Qua the pendente lite and future interest also, the plaintiff is entitled to Simple Interest @ 8% per annum from the date of filing of suit till the date of realisation.
11.5 This issue is accordingly decided in favour of the plaintiff and against the defendant company.
12. "RELIEF"
12.1 Accordingly, the suit of the plaintiff is decreed, against the defendant no. 1 company only, for ₹3,05,930/- (Three Lakh Five Thousand Nine Hundred Thirty) with Simple interest @ 8% per annum from 09.07.2019 till the date of realisation. The plaintiff shall however pay Court Fee qua the interest component on the said suit amount for the period 09.07.2019 till the date of this judgment.
12.2 Plaintiff shall also be entitled to the cost of the suit. Decree sheet be prepared.
Copy of this judgment be also sent to both the sides through electronic modes in terms of Order XX Rule 1(1) CPC. File be consigned to the record room.
Announced in the open Court on 01st day of November, 2023.
Digitally signedDIG by DIG VINAY SINGH VINAY Date:
SINGH 2023.11.01 12:49:37 +0530 Dig Vinay Singh District Judge (Commercial Court)-03 West, Tis Hazari, Delhi (r) Judgment in CS (Comm.) 436/2021 CNR No. DLWT01-006990-2021 M/s The Innovators Vs. M/s Bafna Healthcare Pvt. Ltd.Dated 01.11.2023 Page 13/13